Monday 5 May 2014 02.55 EDT
First published on Monday 5 May 2014 02.47 EDT

Greg Hunt, the environment minister, said he hopes to strike a deal with crossbench senators to implement the Coalition’s key climate policy, although he indicated he may allow it to be amended to allow it to pass.

Hunt said he has had “brief, friendly” discussions with independent senator Nick Xenophon, DLP senator John Madigan and Clive Palmer, whose Palmer United Party will hold the balance of power in the new senate from July.

Palmer recently vowed to vote down Hunt’s Direct Action plan, which will hand out $2.55bn to businesses and farmers keen to lower their carbon emissions. Palmer called it a waste of money and a token gesture.

But Hunt said that a short conversation with Palmer outside the parliamentary cafe had raised his hopes of scrapping the carbon tax and replacing it with the Direct Action plan.

“I’m hopeful we will reach an agreement; the senators will come to me with their questions,” he said. “The architecture [of Direct Action] is largely established but I’ll consider with an open mind any proposals or suggestions they may have.

“I’m respectful of the constitutional role of each of the senators, but I’m also respectful of the will of the Australian people and we were elected with an expressly clear policy to repeal the carbon tax.”

In a speech at the Australian Emissions Reduction Summit and Marketplace in Melbourne, Hunt reiterated his confidence that Direct Action would lower emissions in an efficient way, predicting that it will be the basis of Australia’s climate policy beyond 2020.

Pointedly, Hunt said that the government would retain the clean energy regulator. This contradicts the treasurer, Joe Hockey, who said last week that the body would be abolished. He said that during the same interview in which he called a wind farm “utterly offensive”.

However, there was little extra detail from Hunt on any penalties for businesses that exceed their historical emissions, nor on measures to ensure that emissions do not grow elsewhere in the economy to replace those offset by the scheme.

The safeguard mechanism, which would apply to about 130 firms which emit more than 100,000 tonnes of CO2 a year, will not be unveiled until 2015.

Critics of Direct Action say it is costly, ineffective and places an unfair burden on taxpayers, rather than polluters, to fund emissions cuts. Independent analysis of the voluntary emissions reduction fund shows it is unlikely to meet the government’s goal of a 5% emissions cut by 2020 without significant extra funding.

Asked by Guardian Australia how the government could be certain that businesses would not have reduced emissions anyway, without being funded to do so, Hunt said: “It’s not a psychological exercise. The test here is actual reduction in emissions. What it was before and what it was afterwards. Essentially, it isn’t a business intention test. It’s emissions before compared to emissions afterwards.”

Hunt added that he wanted a “good, genuine, global agreement” when nations gather in Paris next year to strike a new deal to tackle climate change. This echoed John Berry, the US ambassador to Australia, who spoke before Hunt and called for an “ambitious” new agreement to cut emissions.